First dream home? You have something to cheer about!

First dream home? You have something to cheer about!

If you have been vying on that dream home for a long time but were waiting for the right time, it has arrived! In the 2016 Union budget, the Finance Minister has proposed an introduction of additional deduction on interest for home loans up to Rs 35 lakh, with a rider that the value of the house doesn’t exceed Rs 50 lakh.

Isn’t it a reason to cheer for first time home buyers, especially when the costs of property units have increased manifold over the recent years?

As per Indian tax laws, a home buyer is entitled to claim both the interest and principal components of home loan repayment for tax benefits. Presently, interest payable on a ‘self-occupied’ house is subject to a maximum deduction of Rs 2 lakh under the head ‘Income from House Property’.

Real estate industry experts and tax payers were looking forward for the government to increasing the tax exemption limit for home loans, particularly in metro cities, by about Rs 1 lakh to Rs 3 lakh as the current limit of Rs 2 lakh is very trivial. Moreover, the interest, a component of one’s EMI that goes towards principal repayment is allowed to be claimed under Section 80C which can be claimed within the overall limit of Rs 1, 50,000 only.

Further, the government was also urged to consider creating a separate category of deduction for principal re-payment of housing loan, since the principal paid is currently clubbed under Section 80C with other tax-saving instruments, which is insignificant in terms of the relief it provides to the home buyer. If this demand is met, it would leave behind a higher disposable income in the hands of the borrowers, at the same time encourage investments in real estate sector.